Man Group led risers in London with a 4%, or 12.2p jump to 225.7p after Numis Securities recommended the shares.

British software maker Autonomy soared 85p, pr 5.2%, to £17.16p on speculation that the company could be the target of a takeover bid. Traders cited US software giants such as Microsoft and Oracle as possible bidders, but company officials did not return calls seeking comment.

Shares in Royal Bank of Scotland rose after the bank confirmed it plans to axe 3,500 jobs in the UK. The stock rose 0.8% to 46.1p as investors cheered the news on hopes that the cuts will lift profits at the tax-payer owned lender. The government owns 84% of RBS after the bank had to be bailed-out last year following multi-billion pound losses.

Carluccios shares jumped 47% after the Italian restaurant chain said it agreed to be taken over Landmark group, a Dubai-based retail firm, for £90.3m. The deal valued Carluccios shares at 142p in cash, sending the stock 45p higher to to 136.2p. London restaurant entrepreneur Richard Caring is the company's largest shareholder with a 12% stake. Caring has also owned the Strada and Belgo chains, as well as Annabel's club in London.

Markets were also flat as more gloomy economic data pushed down hopes of a pacey economic recovery. Nationwide Building Society said UK house prices fell the most in six months in August. The average home price fell 0.9% from July to £166,507, the mortgage lender said.

The pessimistic outlook on the economy sent gold prices higher to $1,250 an ounce. Investors have recently poured money into commodity and precious metals funds to avoid roller-coaster equity markets. Inflows into precious metal funds reached $550m over the past four weeks, said ETF Securities, one of the largest providers of Exchange Traded Funds. "Flows into gold ETPs rose at an unprecedented pace, with ETF Securities seeing gold ETC assets rise almost $3bn to $11.4bn," the fund company said. Global physically-backed gold fund assets soared to $83bn, up $18bn, in the first half, ETF said.